Ray Grabanski: Wheat, the "Lone Ranger"

Rallying to new highs this week, wheat prices
have continued to rally on drought concerns in the former Soviet Union (FSU) countries of Russia, Ukraine,
and Kazakhstan.That is in spite of a
lower corn market, with a potential 'head-and-shoulders' top in corn that is giving
different signals to traders than the wheat market.

Wheat is
becoming a 'lone ranger' in the bull market for grains, running to new highs while
soybeans are still wavering near their old recent highs around $9.87, basis November
futures.What can be causing so
much of a different response to these markets where
wheat can continue to rally and be on fire, while corn and soybeans stay
more subdued?

For one, the
drought in the FSU is real, with extremely warm temperatures occurring since
July, and the intensity of the heat getting stronger as we move into the
forecast period of August.The
heat is simply continuing to shrink the Russian,
Ukraine, and Kazakhstan harvest that will continue to trim supplies of wheat in the
world.

That is good
news for the US, as we have more than 1 billion bushels of carryout still projected
even in the July report. In that July report, the USDA already started trimming the major
exporters supplies with the 4 mmt cut in the Canadian crop.Those cuts in world
wheat supplies will likely continue in the August report, even in spite of what
might be another hike in the US wheat crop yield.Winter wheat crops in the US
were outstanding, and it looks like the spring wheat crop will also be another
bumper based on this week's HRS wheat crop tour's first few days of surveys.

While wheat
problems continue across the world, the corn and soybean crop in the US continues to
get plentiful rain (too much in many areas) and moderate temps that continue to
allow the crop to get better.Our
Pro Ag yield models suggest that corn crops
have been improving for the past 3 weeks along with soybean crops.Soybeans now have the largest yield
estimate of the year, and it is likely the crop
will continue to improve as we move through July and into August. So far, there
is no sign of the high pressure ridge.